China Zhongwang Posts Net Profit of RMB1.26 Billion for 1H2017

Time:25 August 2017 Font size

Further optimised product mix and tapped into light-weight development in high-end sectors 

First overseas acquisition to strengthen foothold globally

Results Highlight: 

• Total revenue amounted to RMB7.33 billion, with overall sales volume of 285,000 tonnes.

• Sales volume of aluminium alloy formwork, a newly developed product, exceeded 110,000 tonnes, with average selling price reaching RMB32,000 per tonne.

• Overall average selling price rose by 23.4% year-on-year to RMB25,742 per tonne, as a result of optimised product mix.

• Net profit was RMB1.26 billion with net profit margin of 17.2%. Earnings per share was RMB0.15.

• Declared an interim dividend of HKD0.10 (approximately RMB0.09) per share, representing a dividend payout ratio of 55.0%.

• Completed the acquisition of Alunna, a German manufacturer of high-end semi-finished aluminium products, to strategically strengthen foothold and achieve a breakthrough in the global aerospace sector.

(Hong Kong, 25 August 2017) – China Zhongwang Holdings Limited (“China Zhongwang” or the “Company”, together with its subsidiaries the “Group”, stock code: 01333), a world-leading fabricated aluminium product developer and manufacturer, announced its unaudited consolidated results for the six months ended 30 June 2017 (the “Period under Review”). The Group embarked on product-mix adjustments in an effort to enhance its long-term profitability and competitiveness. The newly developed high value-added aluminium alloy formworks contributed to a 23.4% increase in the average selling price to external customers, to RMB 25,742 per tonne, and resulted in an increase in average processing fee from approximately RMB11,005 per tonne for the corresponding period of 2016 to approximately RMB14,069 per tonne for the Period under Review. As the product required advanced production techniques when the current extrusion pace and production efficiency were less than ideal, the production of aluminium alloy formwork occupied a certain amount of capacity, resulting in a decrease in the overall output for the Period under Review. It has an impact on the Group’s short-term revenue and profit. Such impact was partially offset by the increase in the aluminium ingots price and processing fee. The Group recorded revenue and net profit of RMB7.33 billion and RMB1.26 billion, respectively. To reward shareholders for their support, the Board has declared an interim dividend of HKD0.10 (approximately RMB 0.09) per share for the six months ended 30 June 2017, representing a dividend payout ratio of approximately 55.0%.

Mr. Lu Changqing, President and Executive Director of China Zhongwang, said, “Upgrade and transformation of downstream applications in the aluminium processing industry have been accelerating. The increasing demand for new applications of high-end segments provided new opportunities to leading companies. With a focus on long-term development, the Group fully leveraged its advantages in R&D and sought adjustment in its product mix to strengthen its long-term profitability. In addition to the R&D initiatives for new products, the Group strived to make the most out of its existing products by offering integrated light-weight solutions to customers, thereby contributing to a more balanced product mix.”

Expanded aluminium alloy formwork production to enhance the added value of aluminium extrusion products

The aluminium alloy formwork was the highlight of the Group’s aluminium extrusion business during the Period under Review. Such products are widely used in large-scale residential projects and construction works. In response to the guidelines of saving wood by replacing them with aluminium and in accord with the green construction plan advocated by the Ministry of Housing and Urban-Rural Development of PRC, the Group’s aluminium alloy formwork project is among the key programmes of the ten new technologies for the construction industry launched in 2017. With its in-depth market know-how and sophisticated technological capability, and building on its strength of the large-scale extrusion equipment as well as bountiful experience in extrusion, the Group’s technology centre has developed a construction aluminium alloy formwork system that is suitable for the domestic market using patented alloying and surface treatment techniques. The Group’s aluminium alloy formwork is lighter than comparable products with better surface quality, higher strength and longer endurance. It has gained positive market response as it helps reduce average construction costs while elevating construction efficiency. During the Period under Review, sales volume of the Group’s aluminium alloy formwork segment exceeded 110,000 tonnes, with average selling price reaching RMB32,000 per tonne, generating a revenue of approximately RMB3.62 billion. The production expansion of high valued-added products is supported by large-section extrusion equipment. During the Period under Review, one of the two ultra-large 225MN extrusion presses of the Group commenced trial production, while installation for other presses purchased last year will started production successively, unleashing further production capacity and greater value brought by the optimised product mix.

Comprehensively intensified cooperation to capitalise on the light-weight trend in transportation sector

The Group has put its focus on the domestic market and capitalised on the light-weight trend in the transportation sector. During the Period under Review, sales volume of deep-processed products including parts for passenger cars and commercial vehicles supplied by the Group for the domestic market increased. The Group’s outstanding products and process design team has brought the cooperation with customers forward to the initial stage of product development. Through in-depth collaboration with its customers, the Group has become the exclusive supplier of aluminium used in car body for Chery’s “Little Ant” model (eQ1), which has commenced mass production and gained increasing sales volume since its launch this March. The Group has been conducting research in the aluminium extrusion for CH Auto’s aluminum-intensive electric sports car model K50 and has completed the pre-supply of prototype cars. Meanwhile, K50 has passed a series of performance test such as collision test and road test with satisfactory feedback, and has commenced small-lot production. In addition, the Group has been listed as one of the suppliers of aluminium extrusion for the train body of the next generation of high-speed train “Renaissance EMU”. Moreover, China Zhongwang is the first domestic fabricated aluminium manufacturer capable of the independent design and manufacture of aluminium vehicle body for new energy buses. The Group has been supplying aluminium extrusion for BYD Auto’s electric buses since the past few years. By virtue of its remarkable comprehensive strength and all-rounded complete industry chain, the Group has been extending its market share of light-weight projects. It will work alongside with downstream clients to conduct R&D, achieving the replacement of aluminium for steel and pushing the light-weight development in transportation sector.

Enhance industry chain extension and to achieve mass production

The first production line of the Group’s aluminium flat rolling project in Tianjin has commenced production as well as sales in both domestic and overseas markets. Armed with the most advanced techniques and technical equipment in aluminium plate and sheet production at home and abroad, the facility is able to produce a variety of high-performance aluminum products, including aerospace plate, ultra-large size vessel plate and chemical sheet, high-performance vehicle plate, high-speed train plate that are used in a number of high value-added industries, such as aerospace, transportation, high-end industrial equipment and high-end civilian areas. During the Period under Review, the project passed the authoritative certification programme Nadcap for international aviation industry, and obtained a series of accreditations in shipping industry in UK, Norway, Japan, US and China as well as in international railway transportation industry. These credentials underpin the Group’s strengths in technology and management. Meanwhile, the second production line is in the process of equipment installation and testing as scheduled. Upon completion, the project will become the world’s largest and most advanced eco-friendly aluminium flat rolling production base with state-of-the-art equipment. It will be a new flagship for the aluminium processing industry in China and globally.

To complete the first overseas acquisition to strengthen foothold globally

In August 2017, Zhongwang Aluminium Deutschland GmbH, an indirect wholly-owned subsidiary of the Company, basically completed the acquisition of Aluminiumwerk Unna AG (“Alunna”). Upon completion of the acquisition, the Group will hold 99.72% equity interest in Alunna. Founded in 1914, Alunna manufacturers a variety of high value-added aluminium alloy extrusion products including seamless and porthole extruded aluminium tubes, which are extensively applied in various sectors such as aerospace and automotive industry, serving a number of world-renowned clients including Airbus, Boeing, Bombardier, Mercedes-Benz and BMW. It has established itself as one of the industry-leading manufacturers in Europe and around the world. With a history of over 100 years, Alunna has accumulated impeccable R&D capability and developed an integrated production line. This transaction marks a milestone in the Group’s international expansion, and would substantially enhance the Group’s production capability in seamless extruded aluminium tubes for further optimising its product mix. Furthermore, it will accelerate business expansion of the Group into, among others, aviation and automobile industries with the product quality credentials and experience in developing customers of Alunna, therefore enhance the competitiveness of the Group as a whole.

Mr. Lu Changqing added, “The increasing scale of light-weight development in various industries has brought growth opportunities for the aluminium processing industry. The planned infrastructure facilities under the “Belt and Road Initiative”, such as airports, vessels, ports and highways, as well as the tightened requirements on emissions reduction in transportation sector, will lift the demand for high-end aluminium products. China Zhongwang will fully capitalise the synergy of the three core businesses to tap into the opportunities brought by the industrial upgrade in China with a more competitive product mix and comprehensive business deployment, providing satisfactory returns to shareholders in the long-term.”